Question

A $1000 cheque written on 30 June does not appear on the bank statement.

When preparing the bank reconciliation you should:

	1.	Add to the bank balance
	2.	Subtract from the book balance
	3.	Subtract from the bank balance
	4.	Add to the book balance

There are many internal controls over cash because:

	1.	it is a highly desired and easily concealed asset
	2.	it must be reported properly
	3.	it is not valuable outside the organisation
	4.	it is hard to convert into other assets

While preparing a bank reconciliation, which of the following items would be added to the bank statement balance?

	1.	Bank service charges
	2.	Outstanding cheques
	3.	Interest earned on the bank account
	4.	Deposits in transit

Thanks for your help!

Answer 1

Answer to Question 1: - 3.Subtract from the bank balance

$ 1,000 cheque written (drawn) on 30 June that does not appear on the bank statement should be subtracted from the bank balance while preparing the bank reconciliation. , if we start with the bank balance.

Cheques that are not yet presented but deducted from book balance should be deducted from bank balance since different customers will present the cheques at different times.

Answer to Question 2 :- 1.It is highly desired and easily concealed asset.

Money or cash is the basis for everything we do. It is for "cash" we work, do our duties. To earn means to make money. Therefore, cash is a very highly desired asset by all both inside and outside the organization. People do fraud and robberies ultimately to earn money. Money is the medium for all type of transactions and exchanges.

Also, in any business, cash is the most liquid asset and it is very essential to manage the day to day affairs of the company. Apart from fraud or theft cash can be lost easily too. Therefore many internal controls are strictly followed while dealing with cash in any businesses.

Answer to Question 3 :- 4. Deposits in transit

Deposits in transit are those amounts that are already received by the company but has not been yet reflected in the bank statement. This happens mainly on the ending (closing) date where company receives cash or cheques but may not have deposited or deposited but not yet credited on the same day when the statements are also taken.

Therefore, the deposits in transit are added back while the outstanding or unpresented cheques are deducted.